Which would you use to measure the risk of an individual stock, standard deviation, variance or...
Which would you use to measure the risk of an individual stock, standard deviation, variance or beta?
Homework Answers
Standard deviation is used to measure the total risk of a stock ie Systematic and unsystematic risk. Standard distribution uses normal distribution
Beta is used to measure only systematic risk.
Systematic risk is risk that cannot be eliminated by diversification
Unsystematic risk can be mitigated by diversification. It is assumed an investor diversifies his portfolio hence eliminates unsystematic risk. The extra return that he receives is for undertaking systematic risk.
BETA IS USED FOR MEASURING RISK OF AN INDIVIDUAL STOCK
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Which would you use to measure the risk of an individual stock,
standard deviation, variance or...
How would you measure risk besides volatility (don't use Beta etc) or standard deviation?
How would you measure risk besides volatility (don't use Beta etc) or standard deviation?
Which of the following statements about risk measures is correct? a. Beta is a measure of...
Which of the following statements about risk measures is correct? a. Beta is a measure of systematic risk, whereas standard deviation is the measure of total risk. b. Beta is a measure of total risk, whereas standard deviation is the measure of unsystematic risk. c. Beta is a measure of total risk, whereas standard deviation is the measure of systematic risk. d. Beta is a measure of total risk, whereas Standard deviation is the measure of systematic risk. e. Beta...
Describe how variance and standard deviation are used to measure the variability of individual stocks. Explain...
Describe how variance and standard deviation are used to measure the variability of individual stocks. Explain how an investor chooses the best portfolio of stock to hold.
QUESTION 37 A well-informed institutional investor would most likely use standard deviation to measure: a. Total...
QUESTION 37 A well-informed institutional investor would most likely use standard deviation to measure: a. Total risk. b. Systematic risk. c. Unsystematic risk. d. Equity risk premium. QUESTION 38 A well-informed individual investor would most likely use beta to measure: a. Total risk. b. Systematic risk. c. Unsystematic risk. d. Equity risk premium.
How would you measure risk besides volatility or standard deviation?
How would you measure risk besides volatility or standard deviation?
Understanding risk: Part A: Stock A has a standard deviation of 10% and an expected return...
Understanding risk: Part A: Stock A has a standard deviation of 10% and an expected return of 8%. Stock B has a standard deviation of 15% and an expected return of 11%. A client wants to know which stock has a better risk-return profile. How would you answer her? Part B: Stock C has a standard deviation of 20% and a beta of 1.20. Stock D has a standard deviation of 16% and a beta of 1.44. A client wants...
Standard deviation is a measure of:- Select one: a. Risk associate with return of an index...
Standard deviation is a measure of:- Select one: a. Risk associate with return of an index only b. Risk associate with return of a portfolio of stocks only c. All of these d. Risk associate with return of individual stock only
What is the standard deviation of the stock investment ? What is the variance of the...
What is the standard deviation
of the stock investment ?
What is the variance of the corporate bond?
What is the standard deviation of the corporate bond?
What is the variance of the government bond?
What is the standard deviation of the government bond?
Which one is the best investment choice?
HW Score: 74.44%, 74.44 of 100 pts 7 of 7 (6 complete) Score: 0 of 20 pts Question Help P8-16 (similar to) Variance and standard deviation (expected). Hull Consultants,...
8) Given stock X has a beta of 2 and a residual standard deviation of 22%....
8) Given stock X has a beta of 2 and a residual standard deviation of 22%. The market index portfolio has a standard deviation of 12%. Based on CAPM, X has an expected return of 10%, a. Calculate the total variance of stock X. b. Your classmate told you that you can increase stock return by holding higher residual risk. You believe you can achieve a higher rate of return by selling X and use the proceeds to buy stock...
Stock X has an expected return of 15%, standard deviation of 20%, beta of 0.8. Stock...
Stock X has an expected return of 15%, standard deviation of 20%, beta of 0.8. Stock Y has an expected return of 20%, a standard deviation of 40% and a beta of 0.3, and a correlation with stock X of 0.6. Assume the CAPM holds. a. If you are a typical, risk-averse investor with a well-diversified portfolio, which stock would you prefer? b. What are the expected return and standard deviation of a portfolio consisting of 30% of stock X...
Which of the following statements about risk measures is correct? a. Beta is a measure of systematic risk, whereas standard deviation is the measure of total risk. b. Beta is a measure of total risk, whereas standard deviation is the measure of unsystematic risk. c. Beta is a measure of total risk, whereas standard deviation is the measure of systematic risk. d. Beta is a measure of total risk, whereas Standard deviation is the measure of systematic risk. e. Beta...
What is the standard deviation
of the stock investment ?
What is the variance of the corporate bond?
What is the standard deviation of the corporate bond?
What is the variance of the government bond?
What is the standard deviation of the government bond?
Which one is the best investment choice?
HW Score: 74.44%, 74.44 of 100 pts 7 of 7 (6 complete) Score: 0 of 20 pts Question Help P8-16 (similar to) Variance and standard deviation (expected). Hull Consultants,...
Stock X has an expected return of 15%, standard deviation of 20%, beta of 0.8. Stock Y has an expected return of 20%, a standard deviation of 40% and a beta of 0.3, and a correlation with stock X of 0.6. Assume the CAPM holds. a. If you are a typical, risk-averse investor with a well-diversified portfolio, which stock would you prefer? b. What are the expected return and standard deviation of a portfolio consisting of 30% of stock X...
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